Profit surge for Amazon as grocery sales jump

Amazon.com has reported that North American sales in the first quarter of 2018 jumped by around 43 percent from last year to around $US51 billion, beating the expectations of US analysts, who applauded the company’s biggest expansion in profit margins in about two years, according to Thomson Reuters and CBC news.

However, Amazon's Whole Food Market's move away from regional purchasing and promotion, layoffs of regional marketing staff, and the introduction of "shelf slotting" fees may help independent and natural grocers to focus more on these locally manufactured products.

While Amazon was the most-shopped online grocer overall, consumers mostly shop at Walmart online for daily trips such as fresh categories. Walmart topped this year's 'Super 50' US grocers list, followed by Kroger, Albertsons Co, Ahold Delhaize USA, Publix Super Markets, and H-E-B, with Amazon in seventh place due to its acquisition of Whole Foods.

Seattle-based Amazon is winning business from older, big box rivals by delivering virtually any product to customers at a low cost, and at times faster than it takes to buy goods from a physical store. It acquired Whole Foods Market last August to help it send groceries to shoppers' doorsteps.

Sales at physical stores, which primarily reflect Whole Foods Market's sales but also includes a few Amazon bookstores and other physical locations, were $US4.26 billion for the quarter, slightly below the fourth quarter’s $US4.52 billion (vs Whole Foods fiscal year 2016 sales of approximately US$16 billion).

Amazon's US grocery sales have jumped by nearly 50 percent, to around US$650 million, led, by coffee, beverages, and snack foods, according to e-commerce analyst One Click Retail.

The world's largest online retailer said net income rose to US$1.6 billion in the quarter ended March 31, according to Thomson Reuters I/B/E/S.

Prime, Amazon's loyalty club that includes fast shipping, video streaming and other benefits, has been key to the jump in revenue. Members - now more than 100 million globally - spend above average on Amazon.

Amazon expects operating profit this quarter between US$1.1 billion and US$1.9 billion, up from US$628 million a year earlier.

And Amazon is expanding its retail footprint outside the United States, particularly in India. Its international operating loss grew 29 percent to US$622 million in the first quarter.Amazon's global headcount is up 60 percent from a year ago at 563,100 full-time and part-time employees, thanks to a hiring spree and an influx of workers from Whole Foods Market.

According to the Wall Street Journal, Amazon’s dominant share of the e-commerce market is fuelling revenue growth as traditional brick-and-mortar chains close more stores. Online sales are growing faster than overall retail, and Amazon currently commands roughly 43 cents of every dollar spent online, according to estimates by research firm eMarketer.

And during the quarter, Amazon started adding one-and two-hour delivery from its newly acquired Whole Foods grocery stores in a handful of markets, as well as gearing up for the launches late April of new Echo devices for children and the ability to deliver to customers’ cars.

Amazon has been spending heavily on building more warehouses and since buying Whole Foods, the giant online retailer has lowered some prices, adding lockers in store and promising Prime benefits.

Chief executive Jeff Bezos called out AWS’s “remarkable acceleration” in growth in the company’s press release, attributing it in part to the company’s seven-year head start and better functionality.

The news came as the 2018 US Grocery Tracker from Jones Lang LaSalle said that grocery openings were down 28.8 percent last year compared to 2016 as brands examined existing footprints and reevaluated company strategies.

California led the states in increased new store openings with 1.6 million square feet of new space followed by Virginia and North Carolina, with 2.7 million square feet across the two states. Texas remained a hot market, with the addition of 1.2 million square feet of space.